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Sunday, 20 July 2014 18:53

Landlord-tenant lawsuit hints at ‘inevitable byproduct of development’

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An ongoing dispute between two Grand Rapids-based companies demonstrates one potential side effect of downtown redevelopment: litigation.

The series of lawsuits stemming from a landlord-tenant disagreement between CWD Real Estate Investment and the law firm of David & Wierenga PC could portend a more active environment for litigation as developers continue to focus on rehabilitating downtown buildings, according to the judge assigned to the case in Kent County’s Specialized Business Docket.

The case stems from CWD’s spring 2012 purchase of the 50 Monroe building in downtown Grand Rapids, where David & Wierenga was a tenant on the top floor for nearly two decades. The developer bought the aging facility with the intention of rehabilitating it because it was a “pig that won’t fly,” said CWD Managing Partner Sam Cummings, according to court documents.

CWD asked tenants of the building to temporarily relocate for a 24-month period pending completion of the renovations.

Having renewed its lease with the building’s previous landlord just prior to the sale to CWD, the law firm asked the new owner to honor the terms of its lease and permit it to return to the office space after the renovations were completed.

In an affidavit, Cummings alleges that CWD agreed on Oct. 19, 2012 to honor David & Wierenga’s existing lease and never sought to remove the firm as a tenant of the building. David & Wierenga partner Ron David called that assertion “technically accurate,” but he contends the developer did not guarantee the firm could return to its long-time space.

Now the firm seeks restitution for the cost of its “forced relocation,” said Partner Jim Wierenga. CWD counter-sued for breach of contract. The developer is being represented by attorneys at Grand Rapids-based Rhoades McKee PC.

While several sources MiBiz spoke with were surprised that the case has gone as far as it has in the legal process, the judge said in his statements that cases like this are a side effect of downtown redevelopment.

“Tenant displacement is an unfortunate yet inevitable byproduct of development in Grand Rapids,” 17th Circuit Court Judge Christopher Yates wrote in an opinion on the case dated May 14.

In his written opinion, Judge Yates dismissed two out of the three claims made by the law firm, and called the third — a breach of contract claim — “rather tenuous.” However, Yates ruled that David & Wierenga “presented sufficient evidence to create a genuine issue of material fact with respect to that claim.”

Several sources familiar with the case said they expected it to go to trial. According to principals at David & Wierenga, a business law firm with a focus on real estate law, 98 percent of business lawsuits in Grand Rapids are settled out of court.

The firm expected CWD to offer to buyout its lease, Ron David, a partner at David & Wierenga, told MiBiz.

“We expected (them) to say, ‘That’s the cost of doing business,’” he said.

CWD’s Cummings maintains that his company has acted in good faith. He contends that the facts are on the developer’s side, which explains why the parties have not been able to settle the dispute.

“(The lawsuit) is a waste of time, in my opinion,” Cummings told MiBiz. “I am unwilling to compromise my ethics or reputation. … I am the defendant. I didn’t sue them.”

Affidavits filed in the case point to several meetings where the parties negotiated over the law firm’s return, but David & Wierenga wound up leasing space at the recently-renovated 99 Monroe building.

“(I)t was never our desire to leave the top floor of 50 Monroe where our firm had been a tenant for almost 20 years and where we had just signed a new lease with very favorable terms prior to CWD’s purchase of the building,” Wierenga said in a statement to MiBiz.

Several sources who asked not to be named citing the ongoing nature of the litigation said that this particular case is quite rare due to the legal structure of leases, which one Grand Rapids developer described as “iron-clad.” Sources were in agreement, however, that CWD has a reputation for investing in aging buildings, thus strengthening the developer’s case for higher rents.

At least two other firms that had been tenants of 50 Monroe also relocated to the 99 Monroe building around the same time as David & Wierenga. They include Wells Fargo Advisors LLC and the law firm of Gruel, Mills, Nims & Pylman PLLC, a firm with which David & Wierenga maintains a long-term positive relationship, David said.

At the time David & Wierenga renegotiated its lease in 2011 — just prior to CWD’s acquisition of the building — the firm agreed to a lease rate of approximately $13 per square foot, David said. David & Wierenga is now paying around $20 per square foot at the 99 Monroe building, which is owned and operated by Oak Brook, Ill.-based Franklin Partners LLC.

“CWD was disappointed to lose a valued customer and to be entangled in lawsuit,” CWD representatives said in a statement to MiBiz. “We’re pleased that the court has already dismissed two of the three claims made by David & Wierenga and observed that the third claim is “rather tenuous.”’

Read 4873 times Last modified on Sunday, 20 July 2014 09:16

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